{"id":862,"date":"2021-12-22T04:47:49","date_gmt":"2021-12-22T04:47:49","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=862"},"modified":"2024-05-29T07:25:32","modified_gmt":"2024-05-29T06:25:32","slug":"my-business-cannot-pay-its-debts-what-are-my-options","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/","title":{"rendered":"My United Kingdom Business Cannot Pay Its Debts. What Are My Options?"},"content":{"rendered":"\n<p><span style=\"font-weight: 400\">If your business cannot pay its debts, you may have several options available to you. The best course of action will depend on the size of your business, the extent of your debt, and what kind of business structure your business operates under. Although debt problems and financial difficulty can be stressful, there are many ways to get out of debt, regardless of how bad the situation may seem. This article will outline some of the options that may be available to you and the pros and cons of each<\/span>. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Talking to Creditors<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">Before exploring any debt solutions, it is advised that you talk to your creditors. You may be able to restructure your debt and come to an agreement on how to pay them off over time. Alternatively, you may also be able to seek out more time to work out your situation.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Creating a Plan<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">The first thing to do in analysing debt is to create a plan. A starting point might be to make a clear list of your debts, differentiating between high priority debts and non-priority debts. High priority debts have more significant consequences if they are not paid and will include:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">mortgage;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">rent;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">secured bank loans;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">tax; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">court-ordered payment.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">Non-priority debts, on the other hand, will include debts such as:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">credit cards;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">hire purchase agreements;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">unsecured bank loans; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">loans from family and friends.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">Generally, paying high priority debts will be essential to keep your business running. For example, a failure to make payments toward a secured debt might mean that the bank seizes your collateral. If the collateral is the business itself, then you risk losing your business entirely. As such, you should create a list of which debts you should prioritise and try to make regular payments towards them first, so you can keep your business running.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">Keeping your business running will be valuable if you can repay your debt over time through the regular performance of your business. In addition, you can try to improve the amount of money that your business makes through various strategies, such as reducing your outgoings.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">You may be able to reduce your outgoings through, for example, reducing your energy bill. If you are going to cut costs, you should also try to ensure that it will not be counterproductive to your profits.&nbsp;<\/span><\/p>\n<\/div>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+448081968584\" class=\"not-prose\">0808 196 8584<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex justify-center text-left 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A debt management plan is an agreement between you and your creditors to pay off your debt in instalments. Further, it is managed by a financial company and is effectively a repayment plan. Specifically, a debt management plan is usually granted when:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">you can afford to pay your creditors smaller monthly payments starting immediately; or<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">your debt problems are such that you can start making repayments in a few months, but you cannot pay anything back immediately.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">This might be the best option if, as mentioned above, you can pay back your debts over a long time through the regular amount of money that your business brings in. However, note that if you are making a debt management plan, you will have to give details about your financial situation to the debt management company. This may include details about your:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">assets;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">debts;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">income; and\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">creditors.<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Administration Order<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">If your debt is for less than \u00a35,000, is owed to at least two creditors, and is ordered through a county court or High Court judgement against you, then you can pay in instalments through applying for an administration order. The instalments are in the form of monthly payments, which the court divides between your creditors.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">To get an administration order, you must fill in an application on the UK gov website (specifically, form N92).&nbsp;<\/span><\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Individual Voluntary Arrangements<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">An individual voluntary arrangement (IVA) is an agreement with creditors to pay your debts through regular payments to an insolvency practitioner. The insolvency practitioner then divides the money between your creditors.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">Your insolvency practitioner will work out what you can afford to pay and for how long. For an IVA to work, your creditors must agree to it. This might be the best option if you would like more control over your business assets than in bankruptcy. This process allows you to slowly start to pay back your debts without your creditors taking action against you.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">What If I Cannot Pay at All?<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">If you cannot pay your debts at all because you do not have a steady income or enough assets you can sell, then you can apply for a &#8216;debt relief order&#8217; or a &#8216;bankruptcy order&#8217;.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Debt Relief Order<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">You can use a debt relief order if you owe less than \u00a330,000, do not have spare income, and do not own your home. If you get a debt relief order, you will not have to pay certain kinds of debt for a specified amount of time (usually for a year). At the end of the debt relief order, the debts will be written off, and you will not have to pay them.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Bankruptcy<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">Alternatively, you can use a bankruptcy order if you cannot pay your debts at all. This is usually the last resort option, as it means that you lose all of your assets. It will also mean that you become subject to restrictions on money that you can borrow. However, at the same time, a bankruptcy order can be very liberating as it will remove all of your debts completely.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">On the whole, the debt management option that you choose will depend on the income of your business and your prospects of paying back your debts. Therefore, before deciding what to do, it is a good idea to seek help from a professional legal service (such as citizens advice bureaus) to evaluate the best course of action for your specific business.<\/span><\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Key Takeaways<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">There are many ways of dealing with debt. Although it might be a stressful position to be in, you should seek help regarding the options available to you. In any case, it is advised that you start by creating a plan with a list of your high priority debt and non-priority debt. If you think you might be able to pay back your debts over time, you should either speak to your creditors or seek to set up a debt management plan. <\/span>However, if<span style=\"font-weight: 400\"> you cannot pay off your debts at all, then your best option might be to seek a debt relief order or a bankruptcy order.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">If you need help with business debt, <a href=\"https:\/\/legalvision.co.uk\/disputes-lawyers-lp\/\">our experienced disputes lawyers can assist<\/a> as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on <a href=\"tel:+448081968584\" class=\"AVANSERnumber dynamic-number\">0808 196 8584<\/a> or visit our <\/span><a href=\"https:\/\/legalvision.co.uk\/membership\"><span style=\"font-weight: 400\">membership page<\/span><\/a><span style=\"font-weight: 400\">.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Frequently Asked Questions<\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1640147961258\"><strong class=\"schema-faq-question\"><strong>Who is responsible for a business&#8217; debt?<\/strong><\/strong> <p class=\"schema-faq-answer\">It depends on the structure of the business. If your business is under a sole trader structure, then you will be liable for the business&#8217; debt. However, if the business is a partnership, the partners will collectively be responsible.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1640147971130\"><strong class=\"schema-faq-question\">What can I do if I cannot pay my debts at all?<\/strong> <p class=\"schema-faq-answer\">Suppose you cannot pay because you do not have a steady income or enough assets that you can sell. In that case, you can apply for a debt relief order or a bankruptcy order. <\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"488c9024c8\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/862\" \/>            <input value=\"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"My United Kingdom Business Cannot Pay Its Debts. 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The best course of action will depend on the size of your business, the extent of your debt, and what kind of business structure your business operates under. Although debt problems and financial difficulty can be stressful, there are many<a href=\"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/\">Continue reading <span class=\"sr-only\">&#8220;My United Kingdom Business Cannot Pay Its Debts. What Are My Options?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13325,"featured_media":653,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"890,1342,2018,1408,1386,2012","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[26],"tags":[20,21,40,72,73,74,75,76],"class_list":["post-862","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-disputes-litigation","tag-small-business","tag-medium-business","tag-dispute-resolution","tag-business-debt","tag-debt-management-plan","tag-individual-voluntary-arrangements","tag-debt-relief-order","tag-bankruptcy"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>My Business Cannot Pay Its Debts. 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What Are My Options?","datePublished":"2021-12-22T04:47:49+00:00","dateModified":"2024-05-29T06:25:32+00:00","mainEntityOfPage":{"@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/"},"wordCount":1255,"image":{"@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/#primaryimage"},"thumbnailUrl":"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2021\/11\/30230606\/brand-design-00196.jpg","keywords":["small business","medium business","dispute resolution","business debt","debt management plan","individual voluntary arrangements","debt relief order","bankruptcy"],"articleSection":["Disputes and Litigation Articles"],"inLanguage":"en-GB"},{"@type":["WebPage","FAQPage"],"@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/","url":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/","name":"My Business Cannot Pay Its Debts. What Are My Options | LegalVision UK","isPartOf":{"@id":"https:\/\/legalvision.co.uk\/#website"},"primaryImageOfPage":{"@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/#primaryimage"},"image":{"@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/#primaryimage"},"thumbnailUrl":"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2021\/11\/30230606\/brand-design-00196.jpg","datePublished":"2021-12-22T04:47:49+00:00","dateModified":"2024-05-29T06:25:32+00:00","author":{"@id":"https:\/\/legalvision.co.uk\/#\/schema\/person\/af256d267e22e76c05804f9e847c85ed"},"description":"If your business cannot pay its debts, you may have several options available to you. This article explains the pros and cons of each.","breadcrumb":{"@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/#breadcrumb"},"mainEntity":[{"@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/#faq-question-1640147961258"},{"@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/#faq-question-1640147971130"}],"inLanguage":"en-GB","potentialAction":[{"@type":"ReadAction","target":["https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/"]}]},{"@type":"ImageObject","inLanguage":"en-GB","@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/#primaryimage","url":"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2021\/11\/30230606\/brand-design-00196.jpg","contentUrl":"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2021\/11\/30230606\/brand-design-00196.jpg","width":1600,"height":1200,"caption":"Trade Mark Cease and Desist: UK E-commerce Response Guide"},{"@type":"BreadcrumbList","@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/legalvision.co.uk\/"},{"@type":"ListItem","position":2,"name":"Disputes and Litigation Articles","item":"https:\/\/legalvision.co.uk\/category\/disputes-litigation\/"},{"@type":"ListItem","position":3,"name":"My United Kingdom Business Cannot Pay Its Debts. What Are My Options?"}]},{"@type":"WebSite","@id":"https:\/\/legalvision.co.uk\/#website","url":"https:\/\/legalvision.co.uk\/","name":"LegalVision UK","description":"LegalVision is a commercial law firm in the UK with a commitment to innovation","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/legalvision.co.uk\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-GB"},{"@type":"Person","@id":"https:\/\/legalvision.co.uk\/#\/schema\/person\/af256d267e22e76c05804f9e847c85ed","name":"Efe Kati","image":{"@type":"ImageObject","inLanguage":"en-GB","@id":"https:\/\/legalvision.co.uk\/#\/schema\/person\/image\/","url":"https:\/\/legalvision.co.uk\/wp-content\/uploads\/sites\/4\/2022\/01\/cropped-Efe-Kati-e1642996836978-96x96.jpg","contentUrl":"https:\/\/legalvision.co.uk\/wp-content\/uploads\/sites\/4\/2022\/01\/cropped-Efe-Kati-e1642996836978-96x96.jpg","caption":"Efe Kati"},"description":"Efe is a qualified lawyer. He specialises in disputes and commercial transactions and has experience in commercial litigation in the UK. He has completed placements at various Chambers and white shoe law firms specialising in both contentious and transactional law, and served as a Parliamentary Intern in the House of Commons. In addition, he also has experience in advocacy through having worked at an international NGO. Qualifications: Masters of Laws (LLM), BPP Law School, BA, Jurisprudence, University of Oxford; MSc, Political Theory, London School of Economics and Political Science (LSE).","sameAs":["https:\/\/www.linkedin.com\/in\/efe-kati\/"],"url":"https:\/\/legalvision.co.uk\/author\/efekati\/"},{"@type":"Question","@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/#faq-question-1640147961258","name":"Who is responsible for a business' debt?","acceptedAnswer":{"@type":"Answer","text":"It depends on the structure of the business. If your business is under a sole trader structure, then you will be liable for the business' debt. However, if the business is a partnership, the partners will collectively be responsible.","inLanguage":"en-GB"},"inLanguage":"en-GB"},{"@type":"Question","@id":"https:\/\/legalvision.co.uk\/disputes-litigation\/my-business-cannot-pay-its-debts-what-are-my-options\/#faq-question-1640147971130","name":"What can I do if I cannot pay my debts at all?","acceptedAnswer":{"@type":"Answer","text":"Suppose you cannot pay because you do not have a steady income or enough assets that you can sell. In that case, you can apply for a debt relief order or a bankruptcy order. 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